Traders and investors are not known for being timid. With mental and emotional toughness as a natural trait, few things can truly unsettle them. However, comments by former President Donald Trump have shaken their confidence.
Shares of some of the world’s largest chipmakers have dropped following Trump's statement that Taiwan, a key player in the global industry, should pay for its own defense against China. What’s more, the Biden administration has vowed to impose stricter restrictions on U.S. chip exports to China.
Nvidia experienced the largest decline, with its market capitalization falling by more than $200 billion, or 6.7%. Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, saw its stock drop by 8%. Even outside the chip sector, companies within the Magnificent Seven club were affected, with Meta's stock plunging 5.7%.
The Magnificent Seven stocks collectively lost about $500 billion in value yesterday. Last Wednesday, this elite group faced another significant blow, losing more than $600 billion in total valuation.
Beyond the chip industry, Nvidia has been caught in a broader selloff impacting the megacap tech sector. The selloff in Nvidia erased over $200 billion from its market cap, highlighting the extreme volatility of this major public company. Just recently, at the end of June, Nvidia rattled markets when more than $500 billion was wiped out over a three-day period.
Investors are now concerned about the possibility of further trade restrictions on the U.S. chip industry. Trump's remarks are particularly alarming as they could disrupt the longstanding diplomatic relationship between the U.S. and Taiwan. This stance could have major implications for Taiwan's dominance in semiconductor chip manufacturing if a conflict between Taiwan and China arises, potentially causing a catastrophic disruption in the global chip supply chain and severely impacting the U.S. economy.